The Apple Of God's Eye

December 5, 2009

Bankruptcy Certain For America

Editors Comment: This article concludes that the bankruptcy of the United States is now inevitable, approaching the topic from the angle of cash flows and borrowing capacity. Either way, the overall conclusion is supported by the Bible.

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It’s one of those numbers that’s so unbelievable you have to actually think about it for a while… Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that’s not counting any additional deficit spending, which is estimated to be around $1.5 trillion. Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That’s an amount equal to nearly 30 percent of our entire GDP. And we’re the world’s biggest economy. Where will the money come from? …

Total domestic savings in the U.S. are only around $600 billion annually. Even if we all put every penny of our savings into U.S. Treasury debt, we’re still going to come up nearly $3 trillion short. That’s an annual funding requirement equal to roughly 40 percent of GDP. Where is the money going to come from? …

The Federal Reserve has already monetized nearly $2 trillion worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing treasury bonds. Sooner or later, our creditors will face a stark choice: Hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their U.S. bonds plummet. … Which central banks will abandon the dollar next? Brazil, Korea and Chile. …

Source: The Daily Crux | November 24

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